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Midday Market Update

Stocks Sink After Disappointing Chinese Data

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U.S. Market    
Stocks fell this morning after disappointing Chinese economic data. Precious metals were also hit hard on the day, with gold falling to a 2-year low.

Chinese first-quarter GDP rose by 7.7% from 2012 levels, below the 7.9% growth in the fourth-quarter of 2012 and the 8% boost excepted by economists. Chinese industrial production data for March also came in well below expectations. The data raised concerns that a slowing China would drag down global economic activity. 

The Empire State Manufacturing index slowed to 3.05 in April from 9.24 in the previous month. Economists had expected a much smaller decline.  The reading is an indication that activity in New York State is slowing down, and adds to fears that that the broader U.S. economy is also slowing.

At midday the DowS&P 500 and Nasdaq were down 0.9%, 1.0% and 1.2% respectively.

Stocks on the Move
As rumored,  Thermo Fisher (TMO) announced its acquisition of  Life Technologies (LIFE) for $76 per share plus assumption of $2.2 billion in deb this morning. The deal is expected to close in early 2014. The strategic rationale for the acquisition is clear. Thermo Fisher is expanding its already robust product portfolio and will be able to use its massive customer channels to drive revenue and cost synergies. However,  we have a tough time justifying the roughly 14 times EBIT multiple (including assumed debt) for a firm projected to grow at 3% organically. Thermo Fisher shares were up 2% at midday while Life Technologies soared 7.5%. 

 DISH Network (DISH) has offered to buy  Sprint Nextel (S) for $7 per share, consisting of $4.76 per share in cash and the remainder in DISH stock. On its face, the DISH offer  looks superior to Softbank's bid for Sprint, in our view, but each proposal is very different. DISH provides more cash up front, as Softbank has offered to pay $7.30 per share in cash for only 55% of Sprint shares outstanding (a prorated $4.02 per share). Under the DISH proposal, Sprint shareholders would own 32% of a combined Sprint and DISH Network. The new firm would carry a very large debt load--pro forma at the end of 2012, net debt would have stood at about $38 billion, equal to around 5 times EBITDA.  Dish shares fell 5.8% on the report while Sprint S rose over 13%.

Shares of  Citigroup (C) were up over 2% after the firm reported better-than-expected first-quarter results. Revenues rose 3% while profit rose 30% from the year-ago-quarter. The bank reduced its loan loss reserve and said its net interest income was flat in the period.

Foreign Markets
Asian markets were lower this morning after the disappointing Chinese economic data. The Nikkei 225, Hang Seng and Shanghai Composite were off 1.6%, 1.4% and 1.1% respectively.

European shares were also hit. In late trading, the FTSE 100 was down 0.6%, the Paris CAC as off 0.5% while Germany’s DAX was down 0.4%. 

Jeremy Glaser does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.